Category: Books

Fischer Black and the Revolutionary Idea of Finance, by Perry Mehrling.

Fischer Black spanned the worlds of academia and finance.  His formula for the pricing of options remains essential on Wall Street.  His macroeconomic theories — which claim money does not matter, not even for the price level (more on this soon) — are still regarded as crazy.  His personal life sounds like that of a high-functioning Asperger’s:

He did almost all of his work in an outlining program called ThinkTank, which he used as a kind of external associative emmory to supplement his own.  Everything he read, every conversation he had, every thought that occurred, everything got summarized and added to the data base that swelled eventually to 20 million bytes organized in 2000 alphabetical files…Reading, discussion and thinking that Fischer did outside the office was recorded on slips to paper to be entered into the database later.  Reading, discussion, and thinking that took place inside the office was recorded directly.  While he was on the phone, he was typing.  While he was talking to you in person, he was typing.  Sometimes he even typed while he was interviewing a prospective job candidate, looking at the screen not the candidate.

Robert Skidelsky and Sylvia Nasar raised the bar for economic biographies some time ago.  This book is the next step in that chain.  Pre-order it here, in the meantime here is a Perry Mehrling paper "Understanding Fischer Black."

Should you be just a little more ambiguous about your commitment to heterosexuality (if indeed there is one)?  After all, leaving it unclear can make life easier for gays.  Making a point of announcing your mainstream orientation makes it hard for others to leave their preferences unspoken.

Or does it work the other way around?  Perhaps we need openly gay friends and acquaintances to make society more tolerant.  It is inducing people to come out of the closet which brings the positive externality.  Positive declarations of heterosexuality ("My wife is very fond of Alex…") should then be encouraged.

Are you interested in "tipping" issues, and the social construction of norms?  Read the new, excellent, and surprisingly analytical Straightforward: How to Mobilize Heterosexual Support for Gay Rights, by Ian Ayres and Jennifer Gerarda Brown.

It turns out that terror suspects have been complaining about Koran abuse for some time now.  Perhaps they are lying but I fear the worst. 

Rarely is it explained just how important the Koran is to Islam.  As I understand it, the Koran itself is seen as holy, the closest to an extension of God that we have on earth.  No, Muhammed is not parallel to Jesus, but in some regards the Koran is.  That is one reason why it is so important to learn the book in Arabic.

Desecrating the Koran approaches a direct attack on God; it is much worse than tearing up a Bible in Christianity.  Of course this sacred status for the Koran also makes it harder to have a Reformation in Islam. 

For many years I failed to understand the attraction of the Koran (for the record, I am a non-believer).  It seemed to me rather simple and not as dramatically gripping as the Bible.  Then I heard an amazing Koranic recital in Arabic.  This was the best introduction to the Islamic world I have found; it hadn’t occurred to me that a musical dimension was needed.  You can buy my favorite Koranic recording here.  I recommend this highly, both as an aesthetic, musical (not until Robert Ashley did Western music catch up), educational, and for some religious, experience.

Matt Yglesias offers his list, and Will Wilkinson passes the meme to me.  So here are my choices:

1. Summa Theologica: A classic, yes.  But I am neither a Catholic nor an Aristotelian.  Get this randomly chosen excerpt: "There is nothing to prevent a thing which in one way is divided from being another way undivided, as what is divided in number may be undivided in species; thus it may be that a thing is in one way one, and in another way many."

2. Sartre’s Being and Nothingness – This can seem intriguing when I browse it, but then I have the urge to pick up Pascal and I never come back.  I haven’t finished Heidegger’s Being and Time either, but I am not embarrassed by that fact.

3. Harry Potter, various installments – I can’t get through them, and yes I have tried the deeper and darker #3.

4. Gibbon on Rome – I read volume one, but stopped paying attention somewhere in the middle.  The main thesis — that Christianity wrecked the Roman empire — simply isn’t true, and I don’t find the prose mesmerizing, at least not in a positive fashion.

5. Cadillac Desert: The American West and its Disappearing Water.  This is the only one on the list I decided I should start reading.  It is superb and gripping, and my guilt will be gone soon.

Some people will flagellate themselves with such a list, others attack the books.  The real question is which one this exercise induces you to pick up.

Beijing’s Forbidden City and the Great Wall now attract more visitors than Florence’s Uffizi Gallery or the Leaning Tower of Pisa, as China overtakes Italy as the world’s fourth most popular tourist destination.

China is now pulling in over 40 million tourists a year; here is the story.

Here it is, that maddening yet brilliant book. 

The worst part is the talk about the socialization of investment.  My favorite parts — not the same as the best parts — are the notorious chapter 17 (remember all that talk of "own-rates of interest"?), the discussions of "animal spirits," and the short notes at the end about mercantilism and Silvio Gesell.  This book is more poetic, and more image-rich, than just about any other economics tract.  That is one reason why it it has been read in so many contradictory ways. 

What is, after all, the central message?  That aggregate demand matters?  That wages and prices are sticky?  That wages and prices are not always sticky but ought to be, to prevent an ever-worsening downward spiral?  That monetary factors prevent the rate of interest from equilibrating ex ante savings and investment, thereby requiring income adjustments to equilibrate them ex post?  That the rate of interest is simply too high?  That the stock market can screw everything up?  That expectations are the key to the macroeconomy?  All of those?

Keynes’s great contribution was to create an economics in which a persistent Great Depression was possible.  But on policy recommendations, I would stick with Milton Friedman, or for that matter Keynes’s earlier Tract on Monetary Reform.  We can recognize the dangers of deflation without embracing Keynes’s seductive yet unworkably byzantine analytical framework.

Thanks to Brad DeLong for the pointer.

Then Suharto looked at [James] Wolfensohn. "You know, what you regard as corruption in your part of the world, we regard as family values."

That is from Sebastian Mallaby’s The World”s Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations.  This study of Wolfensohn is not only the best book on the World Bank, but it is one of the best books on both leadership and the economics and politics of bureaucracy.  It is also the most biting critique of NGOs I have read, and oddly, the most convincing extant defense of the Bank.  Here is Dan Drezner on the book.

I’ve also been reading Orhan Pamuk’s Snow, a fictional tale of Turkish secularization and religious opposition.  I’ll cite Pamuk, Jose Saramago, and W.G. Sebald as the Continental writers of the last thirty years who will still be read fifty years from now.

Randall Kroszner writes a very nice blurb for my new Markets and Cultural Voices: Liberty vs. Power in the Lives of Mexican Amate Painters:

Cowen is a cross between Vasari and de Soto, using the lives of artists in rural Mexico to challenge the development orthodoxy to illustrate how global markets and liberty are the friends, not the enemies, of the rural poor and their cultural expression.  A stimulating interdisciplinary tour de force and a must-read for anyone who cares about development policy.

You can order the paperback here.  Please do consider buying this book, noting that any royalties will go to the artists.  I regard it as the most personal book I have written — recording the story of these artists, and integrating it with economic understanding — has been a personal quest of mine for almost a decade.

Yes I would prefer that this book is free like MR, but the publisher will not cooperate. 

Click here to see one of my favorite images by these painters.  Here is an earlier MR post on one of the Mexican painters, Marcial Camilo.  Here are yet more images.

Freaknomics is now #2 on Amazon.com, or at least it was late Tuesday night when I wrote this.  That is not number two for economics, that is number two overall.

Henry Hazlitt’s Economics in One Lesson is now on-line.  The first economics book I read was The Incredible Bread Machine; I believe that Milton Friedman’s Capitalism and Freedom was number three.  Then I tried some Galbraith and also picked up (and promptly put back down, I was only thirteen) Friedman and Schwartz’s Monetary History of the U.S..  Thanks to Mahalanobis for the pointer.

Here is his review.  You can find my earlier recommendations of Freakonomics here and here.  The book also has a blog by the authors, we can only hope for more entries…